AI Denials - Medicare Prior Authorizations: A Warning Sign

Corliss
Sep 15, 2025
2 min read

The promise of AI in healthcare lies in its efficiency and effectiveness. The risk? Denials without due process.

In Medicare today, the sharpest controversy is not in traditional Medicare—it is in Medicare Advantage (MA) plans. These private for-profit insurers have deployed algorithmic tools to predict length of inpatient stays, flag “low-value” services, and even recommend early discharge. Patients and providers report denials that were later overturned on appeal, but only after costly delays.

Critically, federal law does not permit AI alone to deny care. CMS rules require that coverage determinations be consistent with Medicare standards, and adverse decisions must involve a licensed clinical review. Yet lawsuits, Senate investigations, and OIG audits have spotlighted cases where insurers leaned too heavily on algorithmic recommendations—putting frail beneficiaries at risk.

States are stepping in. California (SB 1120), Maryland, and Nebraska now ban AI-only prior authorization denials, mandating physician review and patient-specific clinical consideration. The NAIC AI Model Bulletin sets a national baseline: insurers must ensure fairness, transparency, explainability, and meaningful human oversight.

For Medicare providers, payers, and technology vendors, the message is clear:

AI may assist, but cannot decide alone.
Every denial must be clinically reviewed and documented.
Transparency is mandatory, not optional—when patients and regulators ask how AI influenced the decision, the reason for the denial determination must be answered in writing.

Conclusion:

The AI in RCM industry is at a turning point. AI in prior authorizations can reduce administrative waste—but if used as a blunt denial engine, it invites lawsuits, regulatory risks, and reputational harm.

In Medicare, especially, the line is drawn; no “AI death panels,” only accountable, clinician-led decisions. The NAIC Model Bulletin and follow-on actions around AI in insurance are NOT federal law, but they’re rapidly becoming the de facto mandatory position for most insurers.

Has your payer signed on to participate in the NAIC's fair and ethical use of AI plan and position yet?

As the Center for Medicare and Medicaid Services (CMS) and the National Association of Insurance Commissioners (NAICs) highlight, AI-Only Prior Authorization Denials should be a Warning Signal.

About the Author

Corliss Collins, BSHIM, RHIT, CRCR, CCA, CAIMC, CAIP, CSM, CBCS, CPDC, serves as a Principal and Managing Consultant of P3 Quality, a Health Tech and AI in RCM Consulting Company. Ms. Collins stays very busy working on Epic and Cerner RCM Research projects. She also serves as a subject matter expert and Volunteer Education Committee member for the American Institute of Healthcare Compliance (AIHC) and is a Member of the Professional Women's Network Board (PWN).

Disclosures/Disclaimers:

Some of the blog content and details are generated by AI. Reasonable efforts have been made to ensure the validity of all materials and the consequences of their use. If any copyrighted material has not been properly acknowledged, use the contact page to notify us so we can make the necessary updates. P3 Quality is a Responsible AI in RCM Governance and Stewardship leader who identifies gaps, supports addressing the issues, and recommends results-driven solutions.